Improved financial literacy is the key to repairing dire financial state of SA consumers

By: Ronelle Kind, General Manager of Member Engagement Solutions at Momentum Corporate

Quarter 2 2019 Momentum/Unisa Consumer Financial Vulnerability Index results released

While South African consumers have been in a state of severe financial vulnerability for quite some time now, the situation appears to be deteriorating still. This is according to the latest Momentum/Unisa Consumer Financial Vulnerability Index (Momentum/Unisa CFVI), which reveals that overall financial vulnerability declined to 50.35 points in the second quarter of 2019, from 51.22 points in the first quarter.

Ronelle Kind, General Manager of Member Engagement Solutions at Momentum Corporate, says that while these results are a cause for concern, they were to be expected as the financial pressures on consumers’ cash flow increased during the second quarter of 2019.

“The continued deterioration of the financial state of consumers was inevitable given the low economic growth which results in further unemployment, and the low per capita income growth which are worsened by a volatile political environment, low levels of financial capability and low levels of consumer and business confidence.”

Kind listed the main drivers of the rise in financial vulnerability in the second quarter as a decline in disposable income, the inability to save and the failure to service debt.

“An inability to manage debt remains at the heart of most South Africans’ financial vulnerability. Coupled with this is a rising vulnerability regarding income and savings. This demonstrates that savings, which could be accessed during emergencies, periods of unemployment, and times of low incomes are vital to ensure the relief of financial vulnerability” Kind explains.

She believes that improved levels of financial literacy could play a major role in reducing financial vulnerability. “We know that obtaining credit and saving products results directly from decisions made by households. As such, it is fair to assume that a low level of financial capability, which encompasses financial literacy and financial behaviour, is contributing significantly to South African consumers’ current state of financial vulnerability.”

The financial vulnerability of consumers also has an impact on South Africa’s business sector since financially stressed employees are prone to being more unproductive at work. Employers are encouraged to ensure that their employees receive financial literacy training to equip them to handle their finances better. This will not only positively impact employees’ financial vulnerability but it may also have a favourable impact on the business’ bottom line.

Kind suggests that employees who belong to group retirement and insurance schemes make use of the value-added benefits that are integrated with their core group employee benefits offering to help them to “stretch their rands” and to help them on their journey to financial success. “Consumers need to actively take advantage of these additional benefits to reap the financial rewards” she says.

To get the most out of these value-added benefits and services, Kind offers the following three simple tips:

1.Educate yourself on the benefits you have

“It is important to take the time to learn about your wellness and rewards programmes and how you can benefit from it

. Some points translate to cash and others translate to discounts or freebies which save you money – find out what you need the most so that you can do what’s best for your personal financial position,” says Kind.

2.Plan ahead

When it comes to programmes that have a point system, Kind says that a little planning can go a long way. “When it comes to grocery shopping, plan to shop at stores where you know the points will add up. Similarly, for filling up your car, there are often days when you can earn double points, so plan your fuel consumption to last until those days when possible.”

3.Get into shape and make it count

“For reward systems that are linked to wellness and physical exercise, it is important to maintain your fitness to meet your targets. Simple things like parking your car a little further away from your office, or opting to take the stairs over the lift, can make a huge difference and result in big savings over the long term,” concludes Kind.